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Guidewire (GWRE) Posts Q3 Loss, Beats Revenue Estimates

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Guidewire Software GWRE reported a non-GAAP loss of 26 cents per share in third-quarter fiscal 2022 (ended Apr 30, 2022), narrower than the Zacks Consensus Estimate of a loss of 30 cents. However, this compares unfavorably with the year-ago quarter’s non-GAAP loss of 16 cents per share.

The company reported revenues of $197.4 million, rising 20.4% year over year and beating the Zacks Consensus Estimate by 5.7%.

Guidewire Cloud continued to gain momentum with eight cloud deals in the reported quarter, taking the year-to-date count to 24.

Quarter in Detail

Subscription and support revenues (44% of total revenues) soared 34% from the year-ago quarter’s levels to $86.9 million due to higher subscription revenues, which jumped 49% year over year to $66.4 million. The reported figure surpassed the consensus mark of $85 million.

License revenues (27.3% of total revenues) increased 6% year over year to $53.9 million. Nonetheless, the reported figure came in line with the consensus mark of $54 million.

Guidewire Software, Inc. Price, Consensus and EPS Surprise

 

Guidewire Software, Inc. Price, Consensus and EPS Surprise
Guidewire Software, Inc. Price, Consensus and EPS Surprise

Guidewire Software, Inc. price-consensus-eps-surprise-chart | Guidewire Software, Inc. Quote

 

Services revenues (28.7% of total revenues) climbed 18% year over year to $56.7 million, driven by increases in cloud implementation programs. The reported figure topped the consensus mark of $51 million.

Annual recurring revenues (ARR) were $637 million as of Apr 30, 2022, up 18% year-over-year and 17% on a constant currency basis driven by new sales and deal ramps.

Non-GAAP gross margin contracted 470 basis points (bps) on a year-over-year basis to 45.1%. This year-over-year decline was due to the revenue mix shift toward subscription and support revenues and away from higher-margin term license revenues.

Subscription and support gross margin came in at 43.8%, up 140 bps from reported in the year-ago quarter, primarily due to benefits of the cloud infrastructure cost controls put in place. Services gross margin was negative 2.1% compared with a gross margin of 9.6% in the year-ago quarter.

Total operating expenses increased 17.4% year over year to $139.3 million. Non-GAAP operating loss was $24.9 million compared with the operating loss of $16.3 million reported in the year-ago quarter.

Financial Details

As of Apr 30, 2022, cash and cash equivalents and short-term investments came in at $1.1 billion compared with $1.1 billion as of Jan 31, 2022.

Guidewire used $121.5 million in cash from operations during the first nine months of the fiscal year 2022, with a free cash outflow of $138.7 million.

Guidance

For fourth-quarter fiscal 2022, revenues are expected in the range of $226-$232 million. ARR is expected to be between $668 million and $674 million. Non-GAAP operating income (loss) is expected to be between $(2) million and $4 million.

The company also updated its outlook for the fiscal year 2022 based on current expectations. For fiscal 2022, the company now expects total revenues between $794 million and $800 million, higher than the previous outlook of $784 million and $792 million. ARR is expected to be between $668 million and $674 million, above the previous forecast of $664 million to $670 million.

Non-GAAP operating loss for fiscal 2022 is now projected in the range of $47-$53 million, compared with the earlier guidance of $42-$50 million forecasted earlier. For fiscal 2022, cash flow from operations is projected in the range of $10-$20 million, in line with the previous guidance.

Zacks Rank & Stocks to Consider

At present, Guidewire carries a Zacks Rank #3 (Hold).

A few better-ranked stocks from the broader technology sector worth consideration are InterDigital IDCC, Avnet AVT and Cadence  Design Systems CDNS. While Avnet and InterDIgital sport a Zacks Rank #1 (Strong Buy), Cadence carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Cadence 2022 earnings is pegged at $3.94 per share, up 5.6% in the past 60 days. The long-term earnings growth rate is pegged at 17%.

Cadence earnings beat the Zacks Consensus Estimate all last four quarters, with the average being 10.6%. Shares of CDNS have surged 29.6% in the past year.
The Zacks Consensus Estimate for InterDigital 2022 earnings is pegged at $3.28 per share, up 5.1% in the past 60 days. IDCC’s long-term earnings growth rate is pegged at 15%.

InterDigital’s earnings beat the Zacks Consensus Estimate in all the preceding four quarters, with the average being 141.1%. Shares of IDCC have lost 17.8% of their value in the past year.

The Zacks Consensus Estimate for Avnet’s fiscal 2022 earnings is pegged at $6.83 per share, rising 20.5% in the past 60 days. The long-term earnings growth rate is anticipated to be 37.2%.

Avnet’s earnings beat the Zacks Consensus Estimate in all of the last four quarters, the average being 21.22%. Shares of Avnet have grown 11.9% in the past year.


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